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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29569
Experience:  Taxes, Immigration, Labor Relations
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IF PROPERTY IS SOLD BY THE BENEFICIARIES OF THE IRREVOCABLE

Resolved Question:

IF PROPERTY IS SOLD BY THE BENEFICIARIES OF THE IRREVOCABLE TRUST WHO PAYS THE INCOME TAXES
Submitted: 7 years ago.
Category: Tax
Expert:  Lev replied 7 years ago.
If the property is owned by the trust - the gain should be reported on the trust's income tax return. Generally - the fiduciary has a choice - either trust would pay taxed on that income or taxable income would be distributed to beneficiaries (and would be reported on the schedule K-1). In most situations beneficiary's tax rates are lower - and that would be more beneficial to pass income tax liability to beneficiaries.

If the property was distributed to a beneficiary - and it was sold after that - the beneficiary - as a person who owned the property - is responsible for any taxable gain.

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